Presenting a paper to the Bank for International
Settlements in Lucerne, Switzerland, on June 25, Vickers
questioned the British government’s decision to waive
competition law during the financial crisis of September and
October 2008.

“Relaxation of competition law was not a good way to help
financial stability in this case, and as the subsequent problems
of Lloyds Banking Group have shown, it may have worsened it,”
he wrote, saying the decision “would appear to have been a
mistake.”

Vickers, 52, an Oxford University professor and former Bank
of England official, had been appointed chairman of the
commission nine days earlier, on June 16. He wrote in notes to
the document that his draft was written “well before I was
invited to chair” the independent panel. Its terms of reference
require it to consider whether banks should be broken up to
improve competition.

Lloyds, the U.K.’s biggest mortgage lender, may be
recommended for breakup by the five-member panel, according to
committee member Clare Spottiswoode on Nov. 20.

Lloyds spokeswoman Sara Evans declined to comment on the
story, as did the U.K. Treasury, while a spokesman for the
commission was not immediately available to comment. The story
was reported earlier by Sky News.

‘Clear Risks’

The Lloyds’ takeover of HBOS “did pose clear risks to
competition,” Vickers said in the paper and full
nationalization would have allowed “a more competitive
solution.”

The combined Lloyds Banking Group Plc required a bailout of
more than 20 billion pounds from the government, which took a 41
percent stake in the bank.

Lloyds has to sell 600 branches by 2013 to comply with
European Union rules on state aid. The commission may seek an
“expanded carve-out” of branches rather than a full de-merger,
wrote Ian Gordon, an analyst at Exane BNP Paribas SA in a note
to investors this week. He has an “outperform” rating on the
stock.

The commission is scheduled to report on its conclusions in
September.